TNAG-0381-FCO40-427-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 270

J

MRS. HEDLEY-MILLER

жила

Copy to: Mr. Marshall

Cori Tie Faber &

Mr. Holland 25 SEP 1973

ec Sir D. Warsom

CONFIDENTIAL

REGISTRY M.

27

SEP 1973

HKRSY

HONG KONG:

c.c.

You

Metody Mr. Start (HKIOD)

PA

28.17

Com

Lith

22574

Mr. Corlett) For information Mr. Maughan)

Mr. Mitchell (o.r.)

Mr. Walker

Mr. Cambridge - F.C.o.

STERLING AGREEMENT

This is to record that you and I and Mr. Payton of the Bank

of England 'spent a great deal of time at Dar-es-Salaam talking to

Mr. Haddon-Cave.

2.

The difficulties of discussion were aggravated because of

Mr. Haddon-Cave's ignorance of Hong Kong's current sterling position. But he and Mr. Payton agreed on a paper (copy attached) which set out such information as was available, together with two sets of hypothetical calculations of the prospective position at 24th September.

The se

in effect represented the extreme limits of what might in practice prove to be the situation. At one end of the spectrum, Hong Kong's sterling holdings might amount to some 86% of total external reserves, and it should not be difficult for her to get back to her MSP of 89% fairly quickly. At the other extreme, Hong Kong's sterling might amount to no more than about 78% of external reserves, and MSP would

be virtually impossible to achieve.

3. I explained to Mr. Haddon-Cave the great difficulties that we

On the other hand we should see in a straight reduction of MSP. were prepared to be flexible, in the light of Hong Kong's special circumstances, about the requirement to hold MSP from the beginning

of the six month's period for which the offer ran.

4.

I then proposed to him the following form of words as the basis

on which Hong Kong and the U.K. might proceed:

"It is understood that in principle Hong Kong will participate

The hasie on which the muarantee will apply

+he

"ran

anta.

163

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